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CS Professional · Internal and Forensic Audit · Practices related to Internal Auditing

The internal audit charter of Himalaya Pharma Ltd places the Chief Audit Executive under the CFO for reporting and budget approval. The CFO recently asked him to drop a planned review of the finance department's treasury operations. Which standards-based concern is MOST significant?

The most significant concern is impaired organisational independence. The Chief Audit Executive reports to the CFO, who has restricted a review of his own department. Standards expect functional reporting to the audit committee or board so that audit scope cannot be limited by those being audited.

  1. ALack of competency in treasury matters
  2. BImpaired organisational independence, since functional reporting to the CFO allows scope restriction over the CFO's own areaCorrect
  3. CExcessive audit fees
  4. DAbsence of a quality assurance programme

Explanation

Independence requires the audit function to report functionally to the audit committee or board so that scope is not restricted by management being audited. Here the CFO controls reporting and cancelled a review of his own area, a scope limitation. Competency and fees are not indicated by the facts.

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